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Perpetual knowledge bank series: principal

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The principal amount or principal is the original amount of investment in an asset, separate from any earnings or interest accrued. If an investor is borrowing money, then the principal is the actual amount borrowed before interest begins to apply. The principal is therefore the foundation upon which everything else is built on and is crucial to understanding both lending and investing practices.

In the case of fixed income investing, a bonds face value is also known as the principal. This is the amount that a bond issuer owes the bondholder once the bond reaches maturity, separate from coupon payments or interest payments. Fluctuations in the bond market mean the purchase price of a bond may be greater or less than repayment of the principal amount at the established maturity date. For example, a $1,000 bond can sell for far more than this amount if it’s in high demand, but its principal would remain the same.

This analysis has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.

The information is believed to be accurate at the time of compilation and is provided in good faith. This document may contain information contributed by third parties. PIML and PSL do not warrant the accuracy or completeness of any information contributed by a third party. Any views expressed in this document are opinions of the author at the time of writing and do not constitute a recommendation to act. 

The product disclosure statement(PDS) for the Perpetual Diversified Income Fund issued by PIML, should be considered before deciding whether to acquire or hold units in the fund. The PDS and Target Market Determination can be obtained by calling 1800 022 033 or visiting our website http://www.perpetual.com.au

No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. Past performance is not indicative of future performance.

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